Stocks fell Tuesday, the first trading day of the week, as a rally that drove the market to levels not seen in more than a year took a breather.
The Dow Jones Industrial Average fell by 316 points, or 0.92%. The S&P 500 slid 0.79%, while the Nasdaq Composite declined 0.74%.
Markets were closed Monday due to the Juneteenth holiday.
“We’ve had a significant run,” said Art Hogan, chief market strategist at B. Riley Financial. “As we enter a new albeit holiday-shortened week, we’ve got to find credible reasons to continue to grind higher against the forces of negativity that still linger around potential recession, which seems to be like ‘Waiting for Godot,’ and the potential for the Fed that remain rigorous against inflation.”
Decliners outpaced advancers on the New York Stock Exchange 2.5 to 1 on Tuesday. Energy was the biggest laggard in the S&P 500, with the sector falling more than 2%. Meanwhile, Intel was a drag on the Dow, down by more than 3%. Nike and Boeing also weighed on the benchmark, falling more than 2%, each.
Notably, Nvidia bucked the trend, up more than 1% while the major indexes sagged.
Investors are coming off of a strong week, with the S&P 500 hitting its highest level since April 2022. The S&P 500 and the Nasdaq Composite posted their best weekly performances since March, with the broad-market benchmark rising 2.6% and the tech-heavy index adding 3.25%. It was also the S&P 500’s fifth positive week in a row — a first since November 2021 — and the Nasdaq’s eighth consecutive positive week, a feat it previously accomplished in 2019.
Investors were seemingly receptive toward the central bank’s decision to skip a June rate hike last week. Federal Reserve Chairman Jerome Powell told a press conference on Wednesday that the central bank has yet to make a decision on policy ahead of the July meeting. However, policymakers are forecasting two more quarter-point rate increases later this year. The decision to skip a hike in June broke the Fed’s streak of ten consecutive interest rate increases.
Despite Powell’s insistence that future Fed policy will remain data dependent, stocks have been on an upswing. In the week ending June 14, investor bullishness rose to 45.2%, up from 27.4% several weeks ago, according to the American Association of Individual Investors. That’s the highest level since November 2021. Wall Street is trying to gauge how last week’s strong market sentiment will hold up in a shortened trading week that is light on economic data.
“We believe equity markets are as stretched as they can get with market participants wary of missing a potential new bull market,” Mike Wilson, chief U.S. equity strategist at Morgan Stanley, wrote in a note Tuesday.
U.S. housing starts topped estimates in May. There were 1.63 million starts last month, which was higher than the 1.39 million housing starts expected by economists polled by Dow Jones.
New York Fed President John Williams will appear with Fed Vice Chair for Supervision Michael Barr at a corporate governance event in New York City on Tuesday. Fed Chair Powell is set to testify in front of Congress on Wednesday and Thursday.
In earnings, investors will look toward a quarterly report from shipping giant FedEx on Tuesday after the the closing bell.